“I see no hope for the future of our people if they are dependent on the frivolous youth of today, for certainly all youth are reckless beyond words.”
– Hesiod, 700 BC

 

It’s always a bit dangerous to make sweeping generalizations to try and define an entire generation, but we like to live on the edge here at RFG, so let the stereotyping begin. 

Since Americans so often use pop culture as the lens through which we view our generations, I thought I’d start there.  Movies and songs become associated with certain generations, not because of when they were released, but for the ideals and attitudes that they represent and portray.  For the Baby Boomers, The Big Chill chronicles a group of socially conscious children of the sixties struggling with their transformation into avaricious, self-absorbed adults.  For Generation X, The Breakfast Club shows a generation that takes both pride in and accountability for their individuality, while Reality Bites takes a deeper look at the generation’s slacker label.

It’s probably a little premature to assign the pièce de résistance for Generation Y, but there are at least some hints as to some of the themes certain to be present.  Thomas Jefferson once said that “every generation needs a new revolution.”  For Gen Y, that would certainly be the digital revolution.  As a result, it is a generation that has come to expect instant gratification, including in their communication and social interactions.

As a financial institution trying to make itself relevant and appealing to this younger generation, one must look no further than the population counts to understand why this is a necessity.  In terms of sheer numbers, Gen Y is the largest generation in existence today, with over thirty-five percent more people than their Gen X predecessor.  

Defining the Generations

A portion of this difference is due to the somewhat arbitrary definitions of each generation.  If you ask ten people to define the age groups that fall within each generation, you’ll likely get ten different answers.  However, the definitions are typically plus or minus a year or two, so rather than quibble over the precise cut-offs, here is how I’ve defined these four generations for the purposes of this article:

But regardless of the number of years included within each generation, the enormity of Gen Y is also the result of higher birth rates that were experienced during their birth years.  On average, Gen Y experienced approximately 3.8 million births per year, compared to only 3.4 million for Gen X.  Gen Y is typically the offspring of Baby Boomers, so the large numbers should come as no surprise given the fact that there were significantly more Baby Boomers (3.9 million births per year) than the Silent Generation (average 2.7 million births per year).

So what is your institution doing to get the attention of 36 percent of the U.S. population? 

You’ve probably heard that traditional advertising doesn’t work.  Gen Y is often said to be the most marketed to generation ever.  It’s hard to have your message heard when the intended recipient has already seen and heard it all.  Madison Avenue has trained this group to be cynical and distrustful of advertising, and to read between the lines to determine “what is this company trying to sell me?”  The challenge is to find ways to break through these media barriers that Gen Y has learned to put in place.

As a financial institution, the first step in this challenge is to ensure that your products and services are aligned with the needs of this generation.  The data from our latest national research survey speaks loudly as to what some of those needs are:

• Here’s a surprise: Gen Y spends a lot of time on the Internet.  I know, this is by no means earth-shattering news, but it is still worth pointing out considering the implications it should have on your products and marketing.  Sixty-four percent of Gen Yers spend more than 10 hours a week on the Internet, compared to the 36 percent average of the other generations.  So not surprisingly, when asked what media they use to gather checking account information, 71 percent of Gen Y cited the Internet.  Similar results were seen for other deposits, mortgages, credit cards and other loans.  There’s your primary marketing channel.

• Ninety-three percent of Gen Y households use online banking.  Again, very expected results.  But take a look at your Web site, and the current functionality.  Is it up to the challenge of becoming the primary branch for this next generation?  Gen Y not only uses online banking more than others, they use every aspect of it.  The usage rates for bill pay, e-statements, e-mail alerts, online deposit account opening, text alerts, and online loan applications are all significantly higher for Gen Y.  If your online application processes are too cumbersome, you’re much more likely to become the one in five online applications that this generation abandons (compared to the 12 percent abandonment rate we see in other generations).  Remember, this is a generation that craves immediate feedback.  When they want the latest music, they don’t have to wait and go to the record store to purchase it; they immediately download it from iTunes.  They have TiVo so they don’t have to sit through TV commercials.  They can post their creative work on YouTube and instantly get comments from their peers around the world.  They have been programmed not to wait for things, so why would their banking be any different?  When selecting a primary financial institution, Gen Y places much more emphasis on the level of sophistication that exists in the institution’s online banking services. 

• Gen Y doesn’t yet have the highest adoption rate for Internet access on their phones (although it is higher than the overall average), but they seem to like the idea of it more than other generations.  They are more likely than other generations to add Internet access to their phones within the next year, once they feel comfortable in being able to meet the added expense burden.  In the meantime, they are far more likely to utilize text messaging than any other generation, and therefore are more interested in receiving text alerts from their financial institution.  When they are ready to make the shift to Internet mobile banking, they’ll be looking for financial institutions that can meet this need.

 

• But Gen Y isn’t going to make it that easy for you.  Before you close all of your physical branches and dump all of your resources into a virtual branch, I should warn you that they are still prone to wander into a branch every now and then.  In fact, their monthly lobby usage isn’t really all that much lower, at 48 percent, than the 56 percent for other generations.  Given the high propensity to use electronic channels, this may be somewhat surprising.  But when you dig a little deeper into the data, you can see that they have a tendency to use many different channels.  This is driven by the fact that they conduct a lot of transactions, and appear to just use whatever channel is most convenient for them at the time.  Another example of their multi-channel usage is evidenced in the debit card patterns.  The 81 percent who use their debit card each month average 19.1 transactions, compared to the 13.2 transactions conducted by the 64 percent in the other groups who use the card each month.

Here’s one for the master of the obvious file: Gen Y is becoming older with each passing year.  This means their product needs and available balances are growing each year as well.  Now is the time to position your institution as the financial institution of choice for this generation.  There are some institutions that are figuring this out faster than others, and they are capturing more than their fair share of the Gen Y market.  Is your institution one of them, or will you be looking back in ten years wondering where you missed the boat?

 

Need new ideas, recommendations or solutions for attracting Gen Y?

Contact RFG to learn more about our proprietary research on Gen Y and all the generational segments.  Call 800.827.3500 or email

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